While previewing properties over the weekend, I was surprised to see a sold sign in front of a home that I recognized as having been listed for sale for more than a year with different agents. Curious about the selling price, when I returned to my office I checked the MLS and discovered, not surprisingly, the home had sold for much less than the original listing price. How unfortunate for the seller who likely had to put their life on hold until their home sold and for the previous listing agents whose efforts went unrewarded. Obviously, there must have been some issues with the property or the seller for the home to take more than a year to sell.
Most homes listed for sale will sell within a month or two; however, there are certain properties that are more challenging. Their location, condition or history may be so unusual that they require special attention in order to get the property sold. If not, these properties remain on the market for extended periods of time and the sellers eventually become frustrated with the process and either sell the home for substantially less than the listing price or cancel the listing.
Currently in El Dorado County there are 800 homes listed for sale. Collectively they have been for sale for an average of 65 days — some much longer. About 15 percent have been listed for sale for more than 120 days. That’s a problem. The longer it takes to sell a home the lower the price the seller finally accepts. Homes that sell within the first 30 days of being listed will net 98.5 percent of their original asking price while homes listed 90 days or longer will sell at 96 percent of their current listed price and 80 percent have experienced two or more price reductions.
A frequent question often asked by buyers is: “How long has the home been on the market?” Their concern is why the home has been listed for longer than market averages. Have they missed something? Is this a problem property? Why hasn’t the home attracted an offer? If a buyer wants to make an offer on a well-seasoned listing, you can bet their offer will be less than the listing price. This is why the initial offering price is important.
Correctly pricing homes for sale in rural El Dorado County is more challenging than in Folsom or El Dorado Hills. Here’s why. Between 1978 and 1998, county land prices, building permits and impact fees were pretty cheap. Lots of folks moved here from Sacramento County in search of a rural lifestyle to raise their family. They purchased land and built homes themselves or purchased homes already built by small independent builders. These owner-builder homes were not built for resale or neighborhood conformity. They were built for functionality. As families grew, room additions were common. Unlike higher density planned developments of similar homes, finding comparable sales is nearly impossible.
We have an old saying in the real estate business that “Price cures all ills.” And while it’s true that every property, regardless of condition or location, will sell at some price, there are often better alternatives for the seller than continually lowering the price until someone buys. A history of lowering the listing price becomes suspect and encourages lower offers than a listing that is priced correctly from the start.
Most sellers are reasonably motivated to sell their home and price it according to sales of comparable homes and current market conditions. A few, however, can be an obstacle in getting their home quickly sold and at a higher price. They have unrealistic expectations as to their home’s value or discount their agent’s advice as to preparing the home for sale.
Often sellers and their agents will list the home prematurely. First impressions are really important. Shoppers are looking for the best-conditioned home they can afford. When they see a home in need of cosmetic work but priced as others in better condition, they will pass it up. It is far better to postpone listing the home for 30 or 60 days while conditioning it than to have it take that much longer to sell.
A few agents will intentionally over-price a home in order to obtain a listing. “Bidding” is a sales technique used more frequently when listings are scarce. It works like this: Let’s say a seller is interviewing agents to list their home, which is likely worth between $400,000 and $415,000 as substantiated by comparable sales of similar homes. One agent tells the seller he represents Bay Area buyers looking for this exact type of home and he can sell it for $450,000 if only he had the listing. The seller likes the higher price, lists the home but after several months without any offers lowers the price to the $400,000 where it sells. Sellers naturally want the highest price they can get for their home so they are vulnerable to this type of seduction.
The practice of taking a listing at any price is questionable. Over-pricing generally costs the seller time and money because they end up selling the property for less than if they had priced it correctly from the beginning. Correctly pricing a home is more critical when the market is stable or retreating than when real estate values are increasing. Increasing property values will eventually catch up to an overpriced property but a retreating market only magnifies the price difference.
Ken Calhoon is a real estate broker in El Dorado County. He can be reached at [email protected].